
UK mother and baby goods retailer Mothercare says the coronavirus crisis will likely impact its revenues short-term and there have been delays to its franchise deal with Boots, but says “significant” progress is being made on its transformation project.
The retail group set out its transformation plan in November last year, with the aim of becoming “a profitable international franchise operation”, generating revenues through an asset-light model, operating in over 40 international territories.
In an update today, Mothercare said: “We continue to make significant progress with those plans and have substantially completed our transition to refocus the group on our core competencies of brand management and the design, development and sourcing of product to grow the Mothercare business with our global franchise partners.”
As with most businesses, the retailer says the impact of Covid-19 has had direct consequences for the company, in particular given the disruption to both its franchise partners’ and suppliers’ businesses and operations.
Mothercare says that while UK government support has been enacted for around 430 of its Boots Mini-Club retail workers, there will still be incremental operating costs for the group.
The retailer has also witnessed disruption from the coronavirus crisis across its franchise network that it says will have a material impact upon the business’ short-term revenues.

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By GlobalData“We will not be immune to the effect of widespread store closures and restrictions on local population freedom of movement in those territories,” it explains.
“However, the experience we gained as a result of the controlled supply shock that was exerted upon the business at the time of the administration of Mothercare UK and related store closures last November, is proving invaluable. We are in close dialogue with our franchise partners and our manufacturing partners, as we seek to manage and mitigate the overall impact on both our and their businesses.”
The company has also experienced delays finalising its contractual arrangements with Boots, which it expects will be completed in late spring. Mothercare entered into a deal on 13 December for binding heads of terms for Boots UK to become the exclusive franchisee of the Mothercare brand for theUK.
From a financing perspective, building upon work in the autumn, Mothercare notes a “substantial” reduction in bank debt including a GBP10m (US$12.4m) payment from UK administrators. Presently, secured debt amounts to GBP18.5m, secured over the group as a whole, with further sums expected to emerge from the UK administration process.
Clive Whiley, chairman of Mothercare, says: “In the current circumstances, we have activated our contingency plans to deal with the challenges that we and others are facing in the current global crisis, focusing on the well-being of our colleagues alongside our ongoing business and corporate liquidity.
“At this time we believe that our efforts should be focused on helping to preserve the businesses of our franchise and manufacturing partners through even more collaborative ways of working, to ensure both the short term liquidity of our business together with our return to longer term profitability. We are already seeing the benefits of this approach being brought to bear.”
Shore Capital analyst Clive Black says Mothercare’s progress has been demonstrable, and he believes the business can emerge out the other side of the present Coronavirus crisis in its aspired capital light composition.
“In this respect, the Boots UK deal remains vital and we are pleased and relieved to see progress on this tie-up. Maybe not for the faint-hearted investor, but Mothercare has been navigating very choppy waters for some time, so positioning it well from a cultural perspective for the present times.”